Question

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3. A researcher estimates a regression model that contains three variables and a constant, based on a random sample of 30 observations. The researcher suspects a problem with positive autocorrelation and wants to test for its existence. She decides to use a 5% level of significance specify the conditions under which she will draw the possible conclusions available with this test, that is what are the appropriate decision rules in this scenario? (10 pts) Consider the following sample regression results: 4. + 1500 X1+5000 X2+8000 X3 (2121.7) (167.1) (365.7) (562.3) n44 R2 = .78 Yhata 27000 where Yannual salary of the employee Xi years of seniority of the employee X2 1 if B.A. is the highest degree of employee; 0 otherwise. X3 1 if M.S. or higher is highest degree of the employee; 0 otherwise. = 1 if high school or lower is highest degree: 0 otherwise. The values in parentheses are estimated standard errors of the coefficients. Why was the variable X4 excluded from the model? (4 pts) a. 4. (continued) b. Is the sign of the coefficient for the Xs variable plausible? Explain. (4 pts) c. Predict the salary of an employee with a B.A degree and 10 years of seniority.(4 pts) Predict the salary of an employee with a high school degree and 10 years of seniority. (4 pts) d. e. Is a year of seniority worth less to a high school graduate that to a person with a Ph.D. degree? Explain. (4 points) At the 5% level of significance, would you conclude that, on average, an employee with a Ph.D. degree has a higher salary that an employee with a high school degree? Show all components of any hypothesis test. (15 pts) f. 4. (continued) g. At the 1% level of significance, is there evidence that this particular model explains a statistically significant portion of the variation in annual salary? Show all test components. (15 pts) Suppose you were to re-estimate the model and replace the variable X2 with the variable Xs h. What is the new estimated y-intercept? (4 pts) i. Suppose you were to re-estimate the model and replace the variable X2 with the variable X4. What are the coefficient signs for the variables Xs and Xa? (4 pts) SIGN OF Xs SIGN OF X

Answer 1

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